March 23, 2014

Compensating Differentials

When people are paid more to do unpleasant jobs, economists call that wage premium a "compensating differential". Hazard pay, combat zone pay, or higher pay for other types of higher-risk jobs are all good examples of compensating differentials. Here is another [via JR]:

China’s smog problem is a well-known one. That recent story that the government was showing the sun rise on massive video screens because citizens couldn’t see it through the sooty skies may have been fake, but this one’s true. Panasonic pays workers who get transferred to China a monthly bonus for having to work in the polluted Chinese air.

Panasonic considers China to be a “hardship posting,” and that certainly seems like a fair classification. China’s PM 2.5 (particulates up to 2.5 micrometers in size) levels have gone over 400 micrograms per cubic meter on occasion. That’s more than sixteen times the World Health Organization’s established “safe” limits.

Other companies offer hardship allowances, too, but Panasonic is the first to publicly admit that they’re specifically paying transferees extra because of China’s environmental mess.

There are lots of places I'd rather be sent for work than Beijing, for sure. But then the nice places, the cushy postings, can offer lower compensation because of their plusses.

Comments

Compensating Differentials

When people are paid more to do unpleasant jobs, economists call that wage premium a "compensating differential". Hazard pay, combat zone pay, or higher pay for other types of higher-risk jobs are all good examples of compensating differentials. Here is another [via JR]:

China’s smog problem is a well-known one. That recent story that the government was showing the sun rise on massive video screens because citizens couldn’t see it through the sooty skies may have been fake, but this one’s true. Panasonic pays workers who get transferred to China a monthly bonus for having to work in the polluted Chinese air.

Panasonic considers China to be a “hardship posting,” and that certainly seems like a fair classification. China’s PM 2.5 (particulates up to 2.5 micrometers in size) levels have gone over 400 micrograms per cubic meter on occasion. That’s more than sixteen times the World Health Organization’s established “safe” limits.

Other companies offer hardship allowances, too, but Panasonic is the first to publicly admit that they’re specifically paying transferees extra because of China’s environmental mess.

There are lots of places I'd rather be sent for work than Beijing, for sure. But then the nice places, the cushy postings, can offer lower compensation because of their plusses.